2024-04-10 08:57:31 ET
Summary
- I see Annaly facing similar pressures as it did in 2022.
- I see good odds for the yield spread between long-term and short-term rates to become more negative and pressure its profit.
- NLY's leverage risks are also a concern, with its debt-to-equity ratio and asset-to-tangible book value ratio higher than historical averages.
Thesis
History does not exactly repeat, but it certainly rhymes. I am seeing Annaly ( NLY ) under a similar set of pressures as I did in 2022. More specifically, in mid-2022, I published an article (see the chart below) to argue that:
The mREIT sector is one of the most sensitive sectors to the macro-credit cycle. And rising inflation, rate hikes, Russian/Ukraine war will all pressure the yield spread, which consequently will pressure NLY's profits and balance sheet.
Read the full article on Seeking Alpha
For further details see:
Annaly: 2022 Replay